Payroll Tax – Are You Getting It Right - October 2006

Over the past few months we have seen an increase in review activity from the Office of State Revenue (OSR) in relation to compliance with Payroll Tax obligations for employers.

There have also been a range of new and related measures introduced in relation to Payroll Tax and Workers Compensation Insurance grouping.

Payroll Tax Compliance

In relation to the OSR review activities, we have found that the following issues have mainly arisen:

(i) Payments to directors and related entities

(ii) Grouping of related entities

(iii) Payments to contractors and entertainers

(iv) Claims for exemptions for payments to contractors and entertainers and

(v) Claims for concessions in respect of Apprentices

As a result of the increased review activity we have established a prudential review service whereby we can review your compliance with the Payroll Tax obligations and advise on any areas of non-compliance prior to any OSR review. If a Payroll Tax review does occur we have a wealth of experience in dealing with the OSR and ensuring that the review progresses smoothly and quickly.

The OSR have also issued a Payroll Tax quick reference checklist in respect of certain payments. This checklist can be found at www.osr.nsw.gov.au/pls/portal/docs/page/downloads/other/prt_checklist.pdf

The new Payroll Tax Incentive Scheme

The NSW State Government has introduced with effect from 1 July 2006 the Pay-roll Tax Incentive Scheme (PTIS). It is provided in the form of a rebate administered by the Department of State and Regional Development to assist businesses establish and grow in locations where unemployment is above the state average.

If you are approved under the PTIS, you must continue to pay your pay-roll tax to OSR and claim the rebate back from the Department of State and Regional Development.The rebate is available, subject to meeting certain criteria, for employers located in the following regions:

 - Richmond-Tweed

 - Mid-North Coast

 - Hunter

 - Central Coast

 - Fairfield/Liverpool

 - Outer South Western Sydney

 - Canterbury Bankstown

 - Illawarra

Workers Compensation Insurance Grouping

From 1 July 2006, a grouping scheme has been put in place in respect of Workers Compensation Insurance policies for related employers.

The grouping relates to the ‘S’ factor that applies to calculate the premium adjustment in respect of prior claims. This effectively means that the claims history of one member of a ‘group’ will impact on the premiums paid by all members of the group.The grouping only applies where a group exists for Payroll Tax purposes.

Should you have any queries in relation to Payroll Tax compliance, any OSR review activity or Workers Compensation Insurance grouping, please do not hesitate to contact our Tax Associate, Mr Darren Shone, on 02 49 622 688.